2021 (5) TMI 162 - HC - GST

Provisional attachment of Bank accounts of petitioner - despite repeated requests, no information was disclosed by the authority concerned as to why the GST authority exercised such powers - principles of natural justice - HELD THAT - There are no proceedings against the present petitioner under Sections 62, 63, 64, 67, 73 and 74 of the Act. There is no reason therefore, to invoke section 83 against the writ applicant and proceedings. Since the proceedings are initiated by the authorities in connection with the third parties, invocation of powers under Section 83 are not available with the respondents. Therefore, the order of the provisional attachment in connection with the bank account No.3785569992 of M/s. Global Corporation be interfered with. It is also necessary to note that despite of due service to the bank the bank has chosen not to remain present - being a drastic power, the authority concerned cannot be oblivious of the serious consequences of provisional attachment of the bank account. Even if for the purpose of safeguarding the interest of the government revenue, the bank had chosen to follow the directions from the respondents, not to intimate to the petitioner as to why his account was freezed is wholly impermissible. There are already proceedings initiated under Section 79 against the present petitioner, who is the third party. Against such initiation of proceedings under Section 79 of the Act, no challenge in the present petition is made and a limited prayer is to the actions of initiating proceedings under section 83 and freezing of the account which has already been addressed. The attachment is ordered to be lifted and the petitioner is permitted to operate his bank account - Petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Validity of freezing the petitioner's bank account under Section 83 of the CGST Act, 2017.
2. Legitimacy of the provisional attachment of the petitioner's bank account.
3. Applicability of Section 79 of the CGST Act, 2017 for recovery proceedings against the petitioner.

Detailed Analysis:

1. Validity of Freezing the Petitioner's Bank Account under Section 83 of the CGST Act, 2017:

The petitioner, a commission agent with a valid GST Registration, discovered that his bank account was frozen by the Central Bank of India on orders from the Principal Commissioner of Central GST, Mumbai, without prior notice. The petitioner sought reasons for this action but received no satisfactory response. The petitioner argued that Section 83 of the CGST Act, 2017 does not authorize freezing a third party's account to protect government revenue. The petitioner relied on previous judgments, including Valerius Industries Vs. Union of India and Kaish Impex Pvt. Ltd. Vs. Union of India, which held that Section 83 does not permit such actions against third parties.

2. Legitimacy of the Provisional Attachment of the Petitioner's Bank Account:

The respondents contended that the petitioner's account was frozen due to transactions with M/s. Belluxa Trading Company, which was involved in fraudulent activities, including procuring bogus invoices and claiming refunds of accumulated ITC. A significant portion of the refund claimed by M/s. Belluxa Trading Company was transferred to the petitioner's account. The respondents argued that the provisional attachment was necessary to safeguard government revenue. However, the court noted that no proceedings under Sections 62, 63, 64, 67, 73, or 74 of the CGST Act were initiated against the petitioner, which is a prerequisite for invoking Section 83.

3. Applicability of Section 79 of the CGST Act, 2017 for Recovery Proceedings Against the Petitioner:

The respondents also initiated proceedings under Section 79 of the CGST Act, 2017, which allows the proper officer to recover amounts due to the government. The petitioner had not challenged these proceedings in the current petition, focusing instead on the actions taken under Section 83. The court acknowledged that Section 79 proceedings could continue but emphasized that the provisional attachment under Section 83 was not justified in this case.

Judgment:

The court held that the provisional attachment of the petitioner's bank account under Section 83 of the CGST Act, 2017 was invalid as no proceedings under the relevant sections were pending against the petitioner. The court quashed the attachment order, allowing the petitioner to operate his bank account. The court clarified that proceedings under Section 79 of the CGST Act, 2017 could continue, and no opinion was expressed on their merits.

Conclusion:

The court concluded that the provisional attachment under Section 83 was not permissible against the petitioner, a third party, in the absence of pending proceedings under the specified sections of the CGST Act. The bank's failure to provide information and the harshness of the action were also criticized. The petition was allowed, and the bank was directed to lift the attachment, while Section 79 proceedings were permitted to continue.